Corporate exodus unravels disastrous Buharinomics, shaky Tinubunomics

• Multinationals P&G, Equinor, GSK, Sanofi-Aventis exits very worrying – Analysts

• Concern over state of weakening economy 

CYNTHIA EZEKWE

A disastrous eight years of Buharinomics, the clueless management of the Nigerian economy under former president Muhammadu Buhari, and a shaky Tinubunomics of the months-old current Presidency of Bola Tinubu are unravelling the extraordinary danger the Nigerian economy faces under the All Progressives Congress (APC) which appears to do more politics than economy management, multiple concerned analysts said over the weekend.

“Buhari got us into this cul-de-sac. He was not only totally clueless about the economy, but there was a free reign of baseless economic policies driven by individual, rather than national, interest,” said a university politics professor who did not want to be named.

With the economy hemmed in by the disastrous Buharinomics that lasted for eight years, many analysts say they expected that a Tinubunomics, promised as ‘hitting the ground running’ during electioneering campaigns, would immediately put the gear in reverse to get out of the cul-de-sac, but that this was bungled right on inauguration day with policy announcements that were apparently not thought through.

Nigeria is seriously caught up in a revenue quagmire. Foreign exchange earnings are dangerously low, not even enough to cover government spending. The last APC government that applied Buharinomics ran on deficit budgeting throughout its eight years and borrowed blind, largely for consumption. Its reckless money printing adventure through ‘Ways and Means’ borrowings from the central bank, among other factors, has seen inflation running amok and squeezing the breath out of Nigerians, say analysts. 

But a raft of recent exits by multinational companies from Nigeria, especially the latest by Procter & Gamble (P&G) and Equinor, has raised deep concerns over the recovery of the economy under Tinubunomics and how long this would take.    

The multinational consumer goods giant Procter & Gamble (P&G) announced plans to dissolve on-ground operations in Nigeria, citing difficult operating conditions.

P&G is a leading manufacturer of household products, including Pampers diapers, Ariel laundry detergent, Always feminine hygiene products, Oral-B toothpaste, Gillette razors, and Safeguard soap. Its exit from Nigeria has been considered a blow to the country’s economy, which has been struggling with a number of challenges in recent years.

Procter & Gamble is not the only multinational company to have recently exited the Nigerian market. In August 2023, GlaxoSmithKline Consumer Nigeria also announced plans to exit the country after 51 years of operations. Over the past seven years, several other manufacturers in the fast-moving consumer goods (FMCG) industry have also closed their doors in Nigeria, citing the challenging business environment. 

These exits have led to a decline in manufacturing output with many job losses, which have had a negative impact on the country’s economic growth.

Several factors have been cited as reasons for the recent wave of business exits from Nigeria. The rising cost of borrowing due to high interest rates has made it difficult for companies to access capital, while inflation has driven up the cost of inputs and operating expenses. 

Also, the volatility of the exchange rate between the Nigerian naira and major international currencies has created uncertainty for businesses. These challenges have had a severe impact on the country’s manufacturing sector, leading to a loss of jobs and an overall decline in output. A number of companies  that have exited the country in recent time include Surest Foam, Mufex, Framan Industries, MZM Continental, Nipol  Industries, Moak Industries and Stone Industries.

Data by the Manufacturers Association of Nigeria (MAN) shows that the country’s manufacturing sector lost over 76,000 jobs in the first half of 2023 alone, the highest in three years. This trend is expected to continue, with businesses facing significant challenges due to the weak economic outlook. While some manufacturers have been able to adapt by diversifying their operations, many others have struggled to stay afloat. The overall decline in manufacturing has led to a reduction in the country’s overall economic growth and exacerbated the unemployment crisis.

Procter & Gamble commenced operations in Nigeria in 1992 and has been a major player in the country’s consumer goods market in the past three decades, distributing its products through a network of local distributors and suppliers. The company’s brands, such as Pampers, Ariel, and Always, have been popular with Nigerian consumers and have been seen as a sign of stability and investment in the country. However, in recent years, the company has faced challenges due to the devaluation of the naira, the country’s currency, as well as rising inflation and the impact of the COVID-19 pandemic. These challenges have put pressure on the company’s bottom line and impacted its operations.

One of the biggest challenges facing P&G is the difficulty in obtaining foreign currency, particularly U.S. dollars, due to the lack of availability of dollars and the high exchange rate. The company relies on imports of raw materials and other inputs, and the high cost of foreign currency has made it difficult to pay for these imports, leading to losses and a negative impact on its overall financial performance.

The increasing cost of raw materials, the impact of inflation, and the disruption of supply chains have all contributed to a significant increase in the cost of raw materials for P&G. In addition, the increased cost of imported materials has led to higher prices for consumers, reducing demand for P&G’s products. This has created a vicious cycle of high costs, low demand, and further price increases.

P&G has also had trouble navigating the country’s complex regulatory system, which includes lengthy approval processes, inconsistent policies, and high tariffs. These factors have made it difficult for the company to operate efficiently and effectively in Nigeria. The lengthy approval process for new products has led to delays in getting new products to market, while inconsistent policies have created uncertainty and confusion. In addition, high tariffs have increased the cost of doing business, further hampering the company’s ability to compete in the market.

P&G’s decision to leave the Nigerian market will undoubtedly have far-reaching implications for the country. Firstly, the departure of P&G will lead to job losses, as the company has a significant presence in the country and employs many people. In addition, the government will lose revenue from taxes and other fees, which may affect its ability to provide essential services and infrastructure. The loss of P&G’s products will also have an impact on the manufacturing sector, as the company is a major consumer of locally-produced materials.

The economic consequences of P&G’s exit from Nigeria are likely to be significant. As one of the largest consumer goods companies in the country, P&G has contributed to economic activity and employment, and its withdrawal will have an impact on both.

The loss of P&G’s products is likely to lead to higher prices for the products which now have to be imported; and reduced choice for consumers. In addition, the loss of jobs and income for those who worked for the company or in related industries is also likely to have a negative effect on the economy. The ripple effects of this may include a decrease in demand for other goods and services, reduced investment, and a showing up on your GDP, a decrease in demand for other goods and services, a decline in tax revenue, and a reduction in the standard of living. This could lead to a cycle of further economic decline, as lower incomes and higher prices may lead to reduced demand and spending, which could in turn lead to further job losses.

The exit of P&G could be seen as a vote of no confidence in the business environment in Nigeria, which could deter other companies from investing in the country. This could have a ripple effect on the economy and the country’s reputation as a destination for investment.

The potential job losses associated with P&G’s exit are also a major concern. Not only will this lead to a loss of direct employment at the company, but it could also have an impact on related industries such as logistics, retail, and distribution. It could also lead to a decline in foreign direct investment (FDI) into the country.

The exit of P&G from Nigeria raises the possibility of other foreign companies following suit, some analysts say, projecting what could possibly result in a contagion.

Lanre Ijaola, a public relations analyst, commenting on the impact of P&G’s exit on consumers and the economy at large, noted that the impact on consumers would be immeasurable, given the unstable foreign exchange regime and the current economic situation in Nigeria. This suggests that consumers may face increased prices, reduced availability of products, and other consequences as a result of the company’s exit.

Ijaola also noted that the exit could have a significant negative impact on the overall economy, particularly given Nigeria’s reliance on foreign investment and imports.

Ekerete Gam-Ikon, a management consultant in insurance, said:  “The state of the operating environment forces business enterprises and organisations to take decisions that’ll ensure their businesses are thriving and profitable.

“What I read about P & G’s decision was a change in their business model for the Nigerian market from production to importing, which drastically reduces their costs in several ways.

“Looking at it dispassionately, one will agree that the operating environment in Nigeria had always been difficult. The costs of having electricity supply has remained high over the years, putting manufacturers in dire straits.”

Gam-Ikon recalled the exit of Dunlop Tyres and Michelin from Nigeria several years ago, noting that there was no new company that came in to fill the gap that was left behind. This, he explained, raises the possibility that the exit of P&G could have similar consequences, leaving a gap in the market that is not easily filled. 

He also pointed out that there are several factors at play that could exacerbate the situation, including exchange rate volatility, inflation, and government policies.

“This is a time when local manufacturers would take over the market if we had them. A new arrangement that could see local investors taking over the business and investments of P & G has emerged, but do we have such people? I am not sure,” he said.

While Gam-Ikon acknowledged the potential negative effects of P&G’s exit on the workforce, consumers, and government revenue, he stressed the importance of Nigerians remaining resilient and displaying a “can-do” spirit. He noted that this spirit of perseverance and determination is crucial to overcoming the challenges posed by the exit and ensuring that the country does not suffer lasting consequences. He also emphasised the need for the government to create an enabling environment for businesses to thrive and encourage the growth of local industries.

Ojo Akinsola, a software developer, said: “The exit of Procter & Gamble from the market is concerning to say the least. The absence of renowned brands such as Pampers, Ariel, Always, Oral B, Gillette, and Safeguard would create a noticeable gap in consumer choices, potentially limiting access to trusted and high-quality products.”

In addition to the negative impact on jobs and government revenue, Akinsola pointed out that the exit of P&G could also lead to a slowdown in the introduction of innovative and high-quality products. He noted that competition often pushes companies to invest in research and development (R&D), leading to better options for consumers. However, the absence of such competition could hinder the introduction of new and improved products, limiting the options available to consumers and slowing the pace of progress.

According to  Akinsola, the economic implications of P&G’s exit are troubling. He emphasised that the company’s withdrawal may indicate a lack of confidence in the local business environment, potentially discouraging other foreign investors from entering the market. He also observed that  the devaluation of the Nigerian naira against the US dollar is making it even more difficult for businesses and consumers to operate in the country.

“In light of this reality, I strongly urge the government to prioritise the creation of a stable economic environment, address naira volatility, and provide incentives to attract and retain foreign businesses. Also, implementing reforms that enhance the ease of doing business and assuring a secure investment climate are crucial steps to mitigate the impact and encourage economic growth,” Akinsola suggested.

Despite the negative implications of P&G’s exit, some citizens have pointed out that there may also be opportunities for local businesses to fill the gap left by the company. These opportunities could include increased market share and the creation of new jobs, which could help to offset some of the negative effects of the exit. Some local manufacturers may be able to scale up their operations and benefit from the increased demand for locally-produced goods.

Joy Ogbona, a consumer who uses Always sanitary products, noted that while the exit of P&G could be seen as a setback for the Nigerian economy, it could also serve as a wake-up call for the government and businesses to improve the country’s business environment.

Ogbona suggested that the government should focus on reducing bureaucracy and red tape, improving infrastructure, and strengthening the rule of law, all of which could make it easier for businesses to operate and attract new investment.

“I would recommend that the government works to attract new investment and encourage existing companies to stay and expand in the country. These efforts could help to offset the negative impacts of P&G’s exit and boost economic growth in the long run,’’ she said.

Ogbona also offered some advice for individual consumers in light of the P&G exit. First, she suggested that consumers look for alternatives to P&G products that are produced domestically or by international companies that are committed to the Nigerian market. Secondly, she encouraged consumers to share their feedback with the companies they purchase from and let them know how important it is for them to remain in the Nigerian market. This feedback, she said, could help companies to understand the importance of their presence in the country and make decisions that are beneficial for both the businesses and consumers.